advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Wednesday, October 30, 2013

Or.22, rule 10 of C.P.C - In a suit by partnership firm of two partners , when one partner dies pending suit, the suit can be continued by another partner M/s AVK Traders ... Appellant Versus Kerala State Civil Supplies Corporation Limited … Respondent = Reported in http://judis.nic.in/supremecourt/filename=40915

Or.22, rule 10 - In a suit by partnership firm of two partners , when one partner dies pending suit, the suit can be continued by another partner despite of non-joining of uninterested legal heirs of deceased partner as the entire interest devolves on the surviving partner as per rule 10 of Or. 22 of C.P.C. =

Whether on  dissolution  of  the
partnership firm on the death of the partner, could the suit already  filed be proceeded with by the  remaining  so-called partner.   =
under the Partnership Deed dated 4.11.2002 contained the following clause :-

      “In the event of  retirement  of  partner  or  refusal  of  the  legal
      representative of the deceased partner to become the  partner  of  the
      partnership as on the expiry of the period given  to  them  to  become
      partners or on the expiry of  the  period  given  to  them  to  become
      partner, the other partner shall have the power to purchase his  share
      by giving notice to retired partner or the legal representative of the
      deceased partner in writing  to  that  effect  within  three  calendar
      months or receipt of the notice by the retained partner or  the  legal
      representative of the deceased partner.  If the surviving partner fail
      to purchase the share of the partnership or the  legal  representative
      fail to express their interest within the said period, the partnership
      shall dissolve as on the expiry of three months mentioned earlier……”

During the pendency of the suit on 2.2.2009, the father  of  the  Appellant,
who was a partner, expired.  The Appellant and  his  sister  were  the  only
legal representatives of the deceased father.  On the death of  the  father,
the partnership stood dissolved w.e.f. 24.5.2009 since the  sister  was  not
interested in becoming a partner of the firm.

3.     In  view  of  the  above-mentioned  clause,  though  the  firm  stood
dissolved on 24.5.2009,  the  sole  surviving  partner  could  continue  the
business of the firm  as  a  proprietary  concern.   Consequently,  all  the
interests of the firm stood devolved upon the Appellant and  he  filed  I.A.
No.817 of 2002 in O.S. No.39 of 2008 for leave to continue to prosecute  the
suit for and on behalf of M/s AVK Traders  as  a  proprietary  concern.  The
Appellant also preferred I.A. No.814 of 2012 seeking necessary amendment  of
the plaint.  Appellant also filed I.A. No.815  of  2012  under  Order  XXIII
Rule 17 read with Section 151 CPC praying for recalling and  examining  PW1.
The Subordinate Court by a common  order  dated  8.2.2012  allowed  all  the
aforementioned applications preferred by the Appellant.  
a  registered
partnership firm, consisting of only two partners, filing a suit when  both
the partners were alive and 
during the pendency of the  suit,  one  of  the partners died and 
legal heir of the  deceased  partner  did  not  show  any
interest either in the assets of the firm or in  the  liabilities  and  had
refused to join as a partner.  
The  question  is,  on  dissolution  of  the
partnership firm on the death of the partner, could the suit already  filed be proceeded with by the  remaining  so-called partner.   
We  notice,  the
Subordinate Court has allowed that prayer  possibly  bearing  in  mind  the
principle laid down in Order  XXII  Rule  10  CPC,  which  deals  with  the
procedure in case of assignment before the final order of the  suit.   
Rule
10 refers to “devolution of any interest” during the pendency of the  suit.
In such a case, the Court can grant leave to prosecute the suit against the
person to or upon whom such interest has been  devolved.   
Admittedly,  the
partner who died is none other than the father of  the  Appellant  and  the
other sole  surviving  heir  is  his  sister.   
Sister  is  admittedly  not
interested in joining the firm and, therefore, she is not taking  over  the
assets and liabilities of the firm.  
Therefore, there has been  a  complete
devolution  of  interest  in  favour   of   the   Appellant.    
Under   the
circumstances,  the  Subordinate  Court  had  allowed  the  amendment   and
permitted the Appellant  to  proceed  with  the  suit,  granting  necessary
amendment, which, according to the Subordinate Court, was necessary  for  a
proper and effective adjudication of real dispute between the parties.  
The
High Court, in our view, by taking a hypertechnical approach held  that  if
such a prayer is allowed, the same would alter the nature and character  of
the suit.  
In our view, such a stand cannot be countenanced considering the
peculiar facts and circumstances of the case.

10.   We are of the view that the legal consequences  pointed  out  by  the
High Court might apply in a case 
where one of the several partners dies  in
the suit instituted in the name of the partnership firm as compared to when
one of the two partners of the partnership dies.   
Further, the High  Court
failed to notice that if the partnership firm succeeds  in  the  suit,  the
decree so granted would not be executable, and hence a  nullity.  
 In  such
circumstances, we are inclined to allow this appeal and set aside the order
of the High Court interfering with  the  order  of  the  Subordinate  Court
allowing the application for amendment and permission to prosecute the suit
as prayed for.  Ordered accordingly.

                                                            REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                       Civil Appeal No.  9697 of 2013
                  (Arising out of SLP (C) No.20563 of 2012)


M/s AVK Traders                         ... Appellant

           Versus

Kerala State Civil Supplies
Corporation Limited                          … Respondent


                               J U D G M E N T

K.S. Radhakrishnan, J.

1.    Leave granted.

2.    OS No.39 of 2008 was a suit preferred on 1.1.2008 by M/s AVK  Traders,
a partnership firm, for realization of an amount of  Rs.53,39,648/-  against
the Respondent Corporation for claims with regard to various  supplies  made
to the Corporation during the year 2004-06.   
Respondent  Corporation  filed
its written statement on 26.5.2008 denying the claim.  M/s AVK  Traders  was
a partnership firm with only two partners, the  Appellant  and  his  father.
The partnership was later  re-constituted.
The  re-constituted  partnership
under the Partnership Deed dated 4.11.2002 contained the following clause :-

      “In the event of  retirement  of  partner  or  refusal  of  the  legal
      representative of the deceased partner to become the  partner  of  the
      partnership as on the expiry of the period given  to  them  to  become
      partners or on the expiry of  the  period  given  to  them  to  become
      partner, the other partner shall have the power to purchase his  share
      by giving notice to retired partner or the legal representative of the
      deceased partner in writing  to  that  effect  within  three  calendar
      months or receipt of the notice by the retained partner or  the  legal
      representative of the deceased partner.  If the surviving partner fail
      to purchase the share of the partnership or the  legal  representative
      fail to express their interest within the said period, the partnership
      shall dissolve as on the expiry of three months mentioned earlier……”

During the pendency of the suit on 2.2.2009, the father  of  the  Appellant,
who was a partner, expired.  The Appellant and  his  sister  were  the  only
legal representatives of the deceased father.  On the death of  the  father,
the partnership stood dissolved w.e.f. 24.5.2009 since the  sister  was  not
interested in becoming a partner of the firm.

3.     In  view  of  the  above-mentioned  clause,  though  the  firm  stood
dissolved on 24.5.2009,  the  sole  surviving  partner  could  continue  the
business of the firm  as  a  proprietary  concern.   Consequently,  all  the
interests of the firm stood devolved upon the Appellant and  he  filed  I.A.
No.817 of 2002 in O.S. No.39 of 2008 for leave to continue to prosecute  the
suit for and on behalf of M/s AVK Traders  as  a  proprietary  concern.  The
Appellant also preferred I.A. No.814 of 2012 seeking necessary amendment  of
the plaint.  Appellant also filed I.A. No.815  of  2012  under  Order  XXIII
Rule 17 read with Section 151 CPC praying for recalling and  examining  PW1.
The Subordinate Court by a common  order  dated  8.2.2012  allowed  all  the
aforementioned applications preferred by the Appellant.
With regard to  the
prayer for continuing the suit, the Subordinate Court held as follows :-
      “In the instant case, out of two partners in the plaintiff  firm,  one
      partner died  during  the  pendency  of  the  suit  and  as  such  the
      partnership got dissolved.  Therefore, I hold that the  other  partner
      viz. the 2nd petitioner is entitled  to  continue  the  suit.   Hence,
      necessary amendment is also required to the plaint. Therefore,  for  a
      proper and effective adjudication of  the  real  dispute  between  the
      parties the proposed amendment is also liable to be allowed……”

4.    The Respondent Corporation preferred I.A. No.809 of 2012  under  Order
XIV Rule 5 CPC seeking framing of additional issues.  The Subordinate  Court
vide order dated 8.2.2012  dismissed  I.A.  No.809  of  2012  filed  by  the
Respondent Corporation.

5.    Aggrieved by the above-mentioned orders,  the  Respondent  Corporation
preferred Original Petition (Civil) No.631 of 2012 before the High Court  of
Kerala seeking the following reliefs :-


      “(a)  To call for the records leading to Ext.P11, P11(a), P11(b) & P12
           and set aside the same.
      (b)   To declare that the  respondent/plaintiff  is  not  entitled  to
           continue the suit as a Proprietary concern.
      (c)   To direct the Court below to frame additional issues  as  prayed
           for in Ext.P-4.
      (d)   To issue any  other  appropriate  order  or  direction  as  this
           Hon’ble  Court  may  deem  fit  and  proper  in  the  facts  and
           circumstances of the case.”

The High Court did not allow the prayer for amendment of the  plaint  moved
by the surviving partner and held as follows :-
      “When the above be the settled position of law,  the  application  for
      amendment moved by the surviving partner to alter the cause  title  to
      convert the suit as one by the proprietary concern  with  him  as  its
      ‘proprietor’, which was instituted in the name  of  a  firm,  for  the
      reason  of  the  death  of  the  Managing  Partner   and   also   non-
      interestedness of the legal heirs of that partner to come  on  record,
      has no basis or merit at all, as the death of the Managing Partner  in
      no way affects the continuance of the suit  instituted  in  the  ‘firm
      name’, in view of the protection afforded under Order XXX  Rule  4  of
      the Code.”


6.    The High Court also took the  view  that  there  is  no  question  of
altering and amending the plaintiff firm as a proprietary concern  as  that
would alter  the  nature  and  character  of  the  suit,  which  cannot  be
permitted.  Further, it was also held by the Court that no further dilation
over that aspect is called for in the case other than pointing out that the
indefeasible rights of the legal heirs of a  deceased  partner  in  a  suit
filed by a firm are insulated under sub-rule (2) of Rule 4 of Order XXX  of
the Code.   The High Court, however, did not interfere with  the  order  of
the Subordinate Court  allowing  the  application  for  recalling  PW1  for
further  examination.   With  regard  to  the  prayers  of  the  Respondent
Corporation for raising additional issues, the High  Court  took  the  view
that the same should have been allowed.  Consequently, the prayer  made  by
the Respondent Corporation  for  framing  additional  issues  was  allowed.
Aggrieved by the above-mentioned order, this appeal has been  preferred  by
the Appellant.

7.    Learned counsel appearing for the Appellant  submitted  that  on  the
death of one of the partners of a partnership firm consisting of  only  two
partners, remaining partner has become the sole proprietor/owner  with  all
assets and liabilities and as such he can always proceed with the  suit  as
per the provisions contained under Order XXII Rule 10 CPC.  Learned counsel
also submitted that the reasoning of the High Court, if at all apply, could
apply in a case where there are more than one partners after the death of a
partner, in the event of which the firm could continue with minimum of  two
partners.   In  such  a  situation,  learned  counsel  suggested  that  the
provision of sub-rule (2) of Rule 4 of Order XXX of the Code  would  apply.
Learned  counsel  placed  reliance  on  the  judgment  of  this  Court   in
Purushottam  Umedbhai  &  Co.  v.  Manilal  &  Sons  [AIR  1961  SC   325],
particularly para 9 of the said judgment in  support  of  this  contention.
Learned counsel also made reference to the judgment of this Court in CIT v.
Seth Govindram Sugar Mills [AIR 1966 SC 24].

8.    Learned counsel appearing for  the  Respondent  Corporation,  on  the
other hand, submitted that if the Appellant is allowed to continue the suit
in the name of the firm, all the defence set up by  the  defendant  in  the
written statement would be frustrated.    Learned  counsel  also  submitted
that if the amendment sought for is  allowed,  that  will  alter  the  very
nature and character of the suit  and  that  the  High  Court  has  rightly
rejected that prayer which calls for no interference by this Court.

9.    We  are  in  this  case  faced  with  a  situation  of
 a  registered
partnership firm, consisting of only two partners, filing a suit when  both
the partners were alive and 
during the pendency of the  suit,  one  of  the partners died and 
legal heir of the  deceased  partner  did  not  show  any
interest either in the assets of the firm or in  the  liabilities  and  had
refused to join as a partner.  
The  question  is,  on  dissolution  of  the
partnership firm on the death of the partner, could the suit already  filed be proceeded with by the  remaining  so-called partner. 
We  notice,  the
Subordinate Court has allowed that prayer  possibly  bearing  in  mind  the
principle laid down in Order  XXII  Rule  10  CPC,  which  deals  with  the
procedure in case of assignment before the final order of the  suit.   
Rule
10 refers to “devolution of any interest” during the pendency of the  suit.
In such a case, the Court can grant leave to prosecute the suit against the
person to or upon whom such interest has been  devolved.   
Admittedly,  the
partner who died is none other than the father of  the  Appellant  and  the
other sole  surviving  heir  is  his  sister.   
Sister  is  admittedly  not
interested in joining the firm and, therefore, she is not taking  over  the
assets and liabilities of the firm.  
Therefore, there has been  a  complete
devolution  of  interest  in  favour   of   the   Appellant.    
Under   the
circumstances,  the  Subordinate  Court  had  allowed  the  amendment   and
permitted the Appellant  to  proceed  with  the  suit,  granting  necessary
amendment, which, according to the Subordinate Court, was necessary  for  a
proper and effective adjudication of real dispute between the parties.  
The
High Court, in our view, by taking a hypertechnical approach held  that  if
such a prayer is allowed, the same would alter the nature and character  of
the suit.  
In our view, such a stand cannot be countenanced considering the
peculiar facts and circumstances of the case.

10.   We are of the view that the legal consequences  pointed  out  by  the
High Court might apply in a case 
where one of the several partners dies  in
the suit instituted in the name of the partnership firm as compared to when
one of the two partners of the partnership dies.   
Further, the High  Court
failed to notice that if the partnership firm succeeds  in  the  suit,  the
decree so granted would not be executable, and hence a  nullity.  
 In  such
circumstances, we are inclined to allow this appeal and set aside the order
of the High Court interfering with  the  order  of  the  Subordinate  Court
allowing the application for amendment and permission to prosecute the suit
as prayed for.  Ordered accordingly.



                                                            ……..……………………..J.
                                             (K.S. Radhakrishnan)



                                                               ……………………………J.
                                           (A.K. Sikri)
New Delhi,
October 29, 2013

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.